Analysis: Xiaomi’s Smartphone Slip Overshadows EV Success

Xiaomi Corporation’s latest quarterly results led several brokerages to downgrade their forecasts for the company’s earnings and stock price, driven largely by underperformance in its core smartphone segment that overshadowed notable progress in its electric vehicle (EV) business[para. 1]. Bocom International adjusted its 2025 and 2026 revenue estimates for Xiaomi to 466.6 billion yuan ($65.9 billion) and 534 billion yuan, respectively[para. 2]. Huatai Securities also cut its projected non-GAAP net profit growth for 2025 and 2026 by 1.6% and 7.6%, lowering its stock price target from HK$65.4 to HK$53.8 ($6.92)[para. 2].

Forecasts for Xiaomi’s core businesses were revised downward: Huatai Securities now expects Xiaomi to ship 165 million smartphones in 2026, down from its previous estimate of 182 million, with the 2026 smartphone gross margin lowered to 10.7% from 12%[para. 3]. Similarly, Bocom International slashed its 2026 EV sales forecast from 700,000 to 569,000 vehicles and pegged the EV gross margin at 24.5%[para. 3]. These downward revisions reflect growing investor concerns, with Xiaomi’s share price tumbling over 30% since late September, fueled by disappointment following a major product launch and further exacerbated by a widely reported EV crash in October[para. 4].

On November 18, Xiaomi announced its third-quarter results, reporting an 80.9% year-on-year increase in adjusted net profit to 11.3 billion yuan and revenue rising 22.3% to 113.1 billion yuan. Nevertheless, the stock plunged by more than 4.8% the following day[para. 5]. To counteract the slide, Xiaomi and founder Lei Jun repurchased shares worth over HK$900 million across three days, leading to some price recovery[para. 6]. This downturn occurred even as Xiaomi's new businesses—primarily EVs, artificial intelligence, and other initiatives—entered the black for the first time, posting a quarterly operating profit of 700 million yuan[para. 7].

Revenue from these segments reached a record 29 billion yuan, with the EV segment alone bringing in 28.3 billion yuan—a threefold increase from the year before. The boost was attributed to higher vehicle deliveries and increased average selling prices[para. 8]. In Q3, Xiaomi delivered 108,796 vehicles, up from 39,790 a year earlier, and the average vehicle price rose 9% to 260,053 yuan. The company expects to achieve its 350,000 annual sales target one month in advance, aided by ramped-up output at its Beijing factory[para. 9][para. 10].

Ahead of a major new tax policy for new-energy vehicles (NEVs), Xiaomi joined rivals in offering up to 15,000 yuan in tax breaks for cars ordered by November 30 for 2026 delivery. While these incentives may initially boost sales, Everbright Securities warns they will likely erode long-term industry profits and intensify competition[para. 11][para. 12]. This is critical as Xiaomi contends with smartphone challenges: Q3 revenue from smartphones fell 3.1% year-on-year to 46 billion yuan, making up about 40% of total revenue[para. 13].

The drop was attributed to lower average selling prices (down 3.6% to 1,063 yuan), especially overseas, despite a 0.5% increase in shipments to 43.3 million units—the ninth straight quarter of growth[para. 14]. Margins slipped to 11.1% from 11.7%, amid intensifying competition in China as Xiaomi sought to shed its low-cost image[para. 15]. Company leadership noted rising memory costs could further squeeze margins and floated the possibility of price increases; ongoing strategic efforts to move upmarket could help cushion these impacts[para. 16][para. 17].

Xiaomi’s IoT and lifestyle products business saw Q3 revenue growth slow to 5.6%, although gross margin remained robust at 23.9%. The launch of a third major smart appliance base supports Xiaomi’s plan to expand its high-end IoT product line internationally[para. 18][para. 19]. Analysts at Pingan Securities concluded that the growing EV segment could compensate for some decline in consumer electronics earnings, demonstrating a measure of optimism toward the company’s longer-term outlook[para. 20].